Deregulation history lessons

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Deregulation history lessons


Yi Jung-jae

Bad and excess regulations can be catastrophic and even deadly. The worst was the ridiculous farming policy introduced during the Great Leap Forward, an industrialization and social campaign by the Communist Party from 1958-61, which led to the Great Chinese Famine. Farmers had to give up their land and follow new universal farming techniques. They were forced to plant seeds more closely and deeper than normal in an attempt to boost yields.

But the result was low yields. The ill-advised changes coupled with droughts and floods exacted the world’s worst-ever famine, resulting in the deaths of 30 million to 60 million people during the three years. It cost China trillions of yuan over the following three years to normalize harvests that had plunged to 70 percent of pre-agricultural revolution levels. The campaign is still cited as the worst example of public policy gone wrong in the history of the world. And what’s worse about bad regulation is that it takes years to clean up the mess it creates.

Regulations are tough to combat. All of Korea’s presidents failed in their attempts. President Chun Doo Hwan created a presidential committee to remove stumbling blocks to growth in 1982. President Roh Tae-woo established a joint public-private committee to restructure economy-related regulations in 1988, another to comb out unnecessary administrative red tape in 1990 and an advisory board to ease administrative regulations in 1991. President Kim Young-sam in 1993 also set up an administrative reform committee. Committee names were renewed and replaced several times during past administrations, but all failed to produce tangible results.

President Kim Dae-jung made a small breakthrough in 1998. As a part of the bailout prescription from the International Monetary Fund, he created a deregulation and reform committee. But the committee’s work ended in a year. Regulations were revived and increased the following year. President Roh Moo-hyun was passionate on the issue. He even placed a cap on the number of regulations the government could create. But he only ended up disrupting the real estate market. President Lee Myung-bak pledged to pull out the “poles” of red tape. But by the time he left the Blue House, he had planted more poles than before all across the nation.

President Park Geun-hye declared a crusade against regulations. But the boisterous trumpeting and drumbeat do not gather that much of attention because the public has seen and heard the song and dance all too often before. Some even sneer at the gesture as romanticized, vain and pompous. She may end up joining up her predecessors in another grand failure in the fight against regulations.

But it is not without hope. If her administration learns from past mistakes, it still has a chance to see through reforms. First of all, it must understand the failures of past governments. They mistakenly did not count on interference from the regulators - bureaucrats and politicians. Regulations define their power and authority. They cannot easily give them up because they fear they would be a hairless - or powerless - Samson without them. Obviously, they used all kinds of tricks in order to keep them when they were given the order to deregulate.

Second, their deregulation targets were never clear in the first place. Regulations are not all bad; frequently, they are necessary. Most regulations involviing the environment and labor are pivotal to the foundation of the nation. As the government aimed randomly, it obviously had few hits.

Third, past government attempts at deregulation were uniform and uncreative. As regulations are multifaceted, there are no easy or simple solutions to the problem of lifting them. Take, for example, the regulation forcing superstore chains to rotate weekend business closures as a part of efforts to help mom-and-pop shops. Conflicts among the interests of owners of franchise stores, mom-and-pop stores and consumers are all involved in this one administrative order. Weekend closures of chain superstores lead to a reduced number of jobs for people and a loss of votes for politicians.

Even if the cause of the illness is correctly diagnosed, a cure can sometimes not be found. It’s not easy to undo the harm already done. But just because the goal is hard, we cannot defer it forever.

The government first should try to solve what can be easily solved. It must narrow the scope and concentrate on lifting the barriers to economic activity.

According to the Samsung Economic Research Institute, financial damage from economic regulations was estimated at 78.1 trillion won ($72.3 billion) six years ago - tantamount to 9.2 percent of the country’s gross domestic product. In today’s terms, the cost could reach about 100 trillion won.

If half of the regulations are thrown out, the country’s output would increase by 50 trillion won a year. Statistics provide a clearer focus and are persuasive to the general public. With public support, the government would win impetus to fight against resistance from the mainstream and iron out the differences.

President Park held televised marathon discussions on the deregulation theme. She has raised the banner. What must follow are actions. We have seen such a song and dance before. What she needs to show is an unwavering and synchronized march forward if she does not want to end up on the long list of presidents who failed to get the job of deregulation done.

JoongAng Ilbo, March 21, Page 34

*The author is an editorial writer of the JoongAng Ilbo.

By Yi Jung-jae
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